Final rule expands short-term health plans to 12 months

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HHS on Tuesday issued a final rule extending short-term, limited duration health insurance plans, allowing them to have a maximum duration of a year. Enrollees are able to renew their plan for a total of three years. The previous maximum period for such plans was less than three months, a change made by the Obama administration in 2016.

CMS Deputy Administrator Randy Pate told reporters the administration expects as many as 600,000 people to enroll in such plans next year, with projections for 2021-2022 reaching as many as 6 million. Pate said enrollees will see potential savings of between 50-80% compared to the ACA individual market.

The plans, however, are by definition limited in coverage and can be lucrative for insurers, with critics calling them "junk insurance." The final rule includes a notice provision for consumers. "We think it's very important that individuals thoughtfully consider what they're purchasing," Jim Parker, senior adviser for health reform, said on the call.

Dive Insight:

Short-term plans, designed to be a low-cost, temporary safety net, are one of the Trump administration's alternatives to the problem of access to healthcare, and are part of the ongoing Republican efforts to weaken the Affordable Care Act. Pate told reporters HHS believes the plans will be "very attractive to those who have been most poorly-served by the ACA." He did add, however, that the administration makes "no representation that it's equivalent coverage."

"These policies will not necessarily cover the same benefits or extend coverage to the same degree," Pate said.

A Kaiser Family Foundation report published earlier this year found that the expansion of short-term plans, coupled with the elimination of the individual mandate penalty, could negatively impact people who need behavioral health services, substance misuse treatment or maternity care, none of which are typically covered benefits under these types of plans.

The report also warned that short-term plans could have an adverse effect on the ACA-compliant individual market, creating higher premiums and potentially leaving a greater number of people uninsured. Pate said the administration expects about 200,000 people to leave the ACA exchange as a result of this final rule.

Pate said these plans have to be approved by state regulators, which have some flexibility in the way they are presented and sold. Some states will embrace them, he predicted, and others will move to limit them. With the regulation kicking into effect in 60 days, short-term plans could be on the market as soon as October.

"We see it as sort of a slow ramp-up in terms of these plans being offered, with the expectation more people will be able to enroll in 2019," Pate said.

Earlier this week, attorneys general from 11 states and Washington, D.C. sued the administration in hopes of halting the recent expansion of association health plans, which, like short-term plans, are not required to cover all of the essential health benefits mandated by the ACA, are less-regulated and are much more risky for consumers.

The American Hospital Association and Association for Community Affiliated Plans (ACAP) have been critical of short-term plans, saying at the time of the rule proposal that they would increase the cost of comprehensive coverage.

“Short-term, limited-duration health plans have a role for consumers who experience gaps in coverage. They are not unlike the small spare tire in a car," ACAP CEO Margaret Murray said in a statement at the time. "They get the job done for short periods of time, but they have severe limitations and you’ll get in trouble if you drive too fast on them."